I acknowledge the Ngunnawal elders, on whose traditional lands we meet, and pay respect to all First Nations people here today.
In Monty Python and the Holy Grail, a father proudly tells his son ‘When I first came here, this was all swamp. Everyone said I was daft to build a castle on a swamp, but I built in all the same, just to show them. It sank into the swamp. So I built a second one. That sank into the swamp. So I built a third. That burned down, fell over, then sank into the swamp. But the fourth one stayed up. And that’s what you’re going to get, Lad, the strongest castle in all of England.’
Building Medicare wasn’t easy. In the 1960s, economists John Deeble and Dick Scotton of the University of Melbourne carried out an industry study of the health care sector. In a recent article, Ross Williams recounts their work (Williams 2024). Using data on 5,000 people across 4 states, combined with Ronald Henderson’s poverty survey, Deeble and Scotton showed the problems in the existing system.
They found numerous shortcomings. Pensioners got free health care, but low‑income workers didn’t. Around one in 5 Victorians lacked health insurance, and therefore risked a double whammy – if they became badly ill, they could lose their life savings to medical bills. Meanwhile, the system was regressive, since the most affluent enjoyed tax deductibility of both premiums and co‑payments.
In 1967, Deeble and Scotton were invited to a meeting with Labor leader Gough Whitlam, who challenged them to design a better system. They did, and pitched it to the federal Department of Health, who told them their ideas were ‘interesting but totally impractical’ (quoted in Williams 2024).
Deeble and Scotton published their results in a paper in the Australian Economic Review (Scotton and Deeble 1968). It was adopted as Labor policy the same year. If only all economists could have their results turned into party policy so swiftly.
The basic elements of Deeble and Scotton’s plan included hospitalisation without charge in public hospitals, universal medical benefits paid through bulk billing, an income tax levy to fund the program, and the withdrawal of tax concessions on health expenses and voluntary insurance.
Whitlam was elected in 1972, and his government began the process of creating Medibank. As my colleague Bill Shorten has noted, opposition was fierce (Shorten 2024). The Australian Medical Association set up a $2 million ‘fighting fund’, fearing doctors would become government employees (they wouldn’t).
The General Practitioners Society encouraged members to distribute a template letter to patients that included the lines: ‘The control of our country has fallen into the hands of socialists . . . The fight that the GPS is spearheading is basically a fight for freedom – not just freedom for doctors – but freedom for you, for your children and for all people in the country.’
Private healthcare providers and private health insurance companies joined the push against the proposed changes.
The opponents delayed the reform, but couldn’t block it. Medibank began operation on 1 July 1975.
Just over 4 months later, the Dismissal swept Whitlam out. The following month, Malcolm Fraser became Prime Minister. The Liberals soon dismantled Medibank.
But while Medibank might have gone, the nation’s health problems had not. As Jane Hall and coauthors note, 15 per cent of Australians in 1983 had no health insurance cover (Hall et al 2024). Many relied on the charity of doctors, or just went without health care. Medical costs were a common reason for bankruptcy (in the US today, medical debt is the number one reason for personal bankruptcy).
One of the big issues in the 1983 election was universal health care. In fact, universal health care was fought at the ballot box in 11 successive elections: every single poll from 1969 to 1993. For a quarter of a century, Australia’s conservative parties opposed universal health care.
Even after the Hawke government’s victory, doctors’ groups opposed Medicare, railing against it as ‘socialised medicine’. In NSW, hospital doctors went on strike to oppose Medicare. John Howard described bulk billing as ‘an absolute rort’ and threatened to ‘pull Medicare right apart’.
But again, they were unable to overcome the strong public support for a better system. Medicare began on 1 February 1984, less than a year after the Hawke government came to office.
Medicare was intended to be fair, simple and universal. But it was not without its challenges. The sustainability of private health insurance, the size of out‑of‑pocket payments, and access to bulk‑billing doctors are among the issues that have faced the system.
Over the 4 decades since Medicare was introduced, a number of significant changes have been implemented. The National Health Reform Agreement in 2011 saw a move to activity‑based funding, with the Commonwealth contribution based on a national efficient price. In response to declining bulk billing rates, our government has been delivering urgent care clinics and increased bulk‑billing incentives since we came to office in 2022.
Good reform requires good evidence. Although new pharmaceuticals are routinely evaluated using randomised trials, such an approach is less common when it comes to system reform. But good evidence is just as important when we are dealing with human reactions as when we are dealing with chemical reactions. It is one thing to theoretically identify the role of adverse selection and moral hazard. It is another to know how they will shape behaviour.
That said, randomised trials at a system level have delivered insights. In considering alternatives to the fee‑for‑service model, the coordinated care trials of the 1990s included some randomised trials (Esterman and Ben‑Tovim 2002).
Philip Clarke and Henry Cutler have proposed a randomised trial of different models for dental care (Clarke and Cutler 2024), including income contingent loans. They point to the insights from the RAND Health Insurance Experiment, a major US randomised trial that provided important evidence on how different health care models affect people’s decisions. Across government, we are building up the expertise on randomised policy trials through the establishment of the Australian Centre for Evaluation.
It is sometimes said that if you want to know what the future will hold for the average person, look at what the most affluent are doing today. One notable factor about high‑end medicine is the extensive use of data. Genomic testing can provide valuable information about disease risks. Data from wearables can provide information on health conditions. Yet before these can be implemented at scale, it is crucial to deal with issues around privacy, security, expertise and ethics.
Another feature of top‑end healthcare is the use of multidisciplinary teams, drawing on expertise on everything from dieticians to dermatologists. Since 1984, allied health care has expanded considerably. There are some initiatives in place for team‑based care for people with chronic health conditions, but for the average patient, coordination could be better. Co‑location of services is being pioneered in some settings, including First Nations health care, and offers the potential for better patient care and less duplication.
There remains an ongoing challenge with out‑of‑pocket costs. As Health Minister Mark Butler has pointed out, the Coalition’s decision to freeze Medicare rebates for 6 years ripped billions out of general practice. Bulk billing rates declined alarmingly. Mark argues that when we came to office, general practice was in the worst shape it had been in the 40‑year history of Medicare. According to a 2022–23 survey, 7 per cent of Australians reported delaying or not seeing a GP because of cost (ABS 2023). Our changes to bulk billing incentives are aimed squarely at addressing this issue – and they are having an impact. In April 2024 alone there were 420,000 additional free visits to the doctor.
As Minister Butler put it in his speech to the National Press Club last year, ‘The case for reform is now urgent. We can’t keep trying to treat 21st century Australia with 1980s Medicare.’ (Butler 2023) Our government appreciates the role of the Academy of the Social Sciences in Australia in drawing together experts to address this task, and values the research that will help shape a stronger Medicare system in the decades ahead.
References
Australian Bureau of Statistics. 2023. Patient Experiences, 2022–23, ABS, Canberra.
Butler, M. 2023. Speech – National Press Club, 2 May
Clarke, P. and Cutler, H., 2024. A Proposal to Extend Universal Insurance to Dental Care in Australia. Australian Economic Review. 57(2): 168–173.
Esterman, A.J. and Ben‑Tovim, D.I., 2002. The Australian coordinated care trials: success or failure?. Medical Journal of Australia, 177(9): 469–470.
Hall, J., van Gool, K., Haywood, P. and Fiebig, D., 2024. Medicare at 40: Are We Showing Our Age?. Australian Economic Review. 57(2): 200–205
Scotton, R.B. and Deeble, J.S., 1968. Compulsory health insurance for Australia. Australian Economic Review, 1(4): 9–16
Shorten, B. 2024. Medicare: 40 years of looking after us. West Australian, 1 February
Williams, R., 2024. Australian Pioneers in Health Economics: The Origins of Medicare. Australian Economic Review. 57(2): 145–148